Executive vice president, CEO & CFO of New Jersey-based Suburban Consulting Engineers
By Liisa Andreassen, Correspondent
Andrew Holt has been in the engineering business for 33 years, and 23 of them have been with Suburban Consulting Engineers. At 52, Holt said the time has come to make his mark, to experience the payoff for all that time spent in the trenches.
A graduate of Montana State University with a bachelor’s in civil engineering, and with a master’s in environmental engineering from the New Jersey Institute of Technology, it would seem that Holt’s school days are over. But that’s not the case. He’s currently enrolled in Centenary University, where he’s pursuing an MBA. During the course of his business studies, he wrote a personal mission statement which, Holt said, serves as a constant reminder to hold himself accountable to his ideals. The statement, he said, is working.
Suburban Consulting Engineers has just started an ambitious, five-year plan to double revenue, double the number of employees, and increase profitability by as much as two to three times the industry average. To implement this plan, Holt and the firm knew they had to bring more people into the fold rather than employ a narrow, top-down approach. The firm is focused on three areas: Growth/Profitability; Business Development; and Technology. SCE has doubled in size in the last five years, and Holt says the firm can do it again.
Out of a firm of about 110 people, only six are owners, or about five percent. And that’s about right. To become an owner, someone has to exceed expectations, not just a few times, but over a career. The litmus test is tough, but ownership awaits those who can deliver at the highest level year-in and year-out.
In terms of retained earnings, SCE is committed to driving profits back into the firm or, as Holt likes to say, taking care of the “golden goose.” Part and parcel of that effort is to make sure everyone is pulling their weight around the office.
“One thing we continually work to overcome is the feeling of entitlement that some develop after putting in the time without necessarily achieving the results,” Holt said. “We are a results-based organization, and advancing into management requires demonstrated results and teamwork, regardless of the amount of time spent learning at our firm.”
A Conversation with Andrew Holt
Do you tie compensation to performance for your top leaders?
Currently, compensation levels for top leaders is not directly tied to performance, but performance is one of the criteria we evaluate when considering compensation amounts and adjustments. Performance must be accurately and fairly measured and reported to the individual throughout each evaluation time period. As a growing company, we are continuing to perfect and improve on performance monitoring and reporting systems. Until such time, as these systems are reliably operating, we defer to a committee review process where the senior leadership compares and prioritizes the roles and responsibilities of each leader. Additionally, we invite top leaders to positions of ownership and as such, their compensation includes distribution of company profit. All top leaders have a direct influence on their total compensation through improved performance.
What actions do you take to address a geographic office or specific discipline in the event of non-performance?
Non-performance in any organization is an issue, especially when introducing the complexities of geographic distance or unique service disciplines. The critical action is to be aware of the non-performance issues through measurement and reporting (whether it be profitability, adherence to core values, or marketing and sales). Once identified, immediate dialogue must occur with those accountable for that area of performance or office, preferably in face-to-face meetings where corrective action plans can be developed, implemented and monitored. We typically find that serious performance issues require corrective action plans lasting up to one year. However, that level of investment and attention is warranted for the long-term health of the company.
Have you ever closed an under-performing office? If so, tell us about it.
The decision whether to close an underperforming office is not one that can be taken lightly. Earlier in my career, I was responsible for managing a regional office of 13 employees, and the corporate leadership decided to close the office due to the economic downturn and the higher than average overhead burden. In the end, it was the right decision as it realigned the corporate structure, facilitating a smooth ownership transition, and many of the employee resources were transferred so the impact was minimal. In hindsight, a more thorough dialogue and action plan for the office closing would have offered less overall disruption, so as we move forward, similar significant decisions are being made with thoughtful review, risk mitigation, exploration of options, and with an eye towards employee satisfaction and care. Such decisions are through ownership and leadership consensus with the affected parties being made aware. Of course, our goal is to avoid having to make these types of decisions at all.
How many years of experience – or large enough book of business – is enough to become a Principal in your firm? Are you naming principals in their 20s or 30s?
Becoming a principal of the firm is not tied directly to years of service or a particular value of their book business. Cultivating principals has taken many different paths in our 33-year history, having undergone one complete ownership transition and preparing for the next. I think the point of this question is to understand what firms are doing today, and not necessarily what happened years ago, so our answer is yes, we are identifying and signing on new owners/principals who are in their early 30s, some of whom have only ever worked at this company. Their experience or book is secondary to their true value to the company, which is a demonstrated commitment to putting the needs of the company ahead of their own needs, as well as an ability to work well within the organization’s values while being successful in their area of study.
Internal transition is expensive. How do you “sell” this investment opportunity to your next generation of Principals? How do you prepare them for the next step?
Internal transition is all our firm has known, and the plan is to keep that the primary mode of ownership transition going forward, and this method of creating ownership is not as expensive as it might appear. While the candidate may look at the initial investment as prohibitive, we work with those candidates to arrive at compensation packages that sustain their quality of life, but provide an enhanced motivation for company success, which in turn, fuels their buy-in capabilities. All the while, investing in these new owners builds the long-lasting, trusting relationship needed to work together in advancing the company’s goals. We are fortunate to have several success stories and examples to show the newest owners that they are not taking extreme risk with buying into the company.
Describe the challenges you encountered in building your management team over the lifetime of your leadership? Have you ever terminated or demoted long-time leaders as the firm grew? How did you handle it?
Building our management team has probably been the biggest challenge we have faced through the years, and I would be crazy to think we have perfected it at this point. There have not been too many long-time leaders, more so the short-term hopes that unfortunately never really translated into the capable leaders and managers which was expected (or paid for). One thing we continually work to overcome is the feeling of entitlement that some develop after putting in the time without necessarily achieving the results. We are a results-based organization, and advancing into management requires demonstrated results and teamwork, regardless of the amount of time spent learning at our firm. Those who advance understand this principle and, fortunately, our management team consists of those individuals today.
How do you promote young and new leaders as the firm grows?
Our youngest and newest leaders are promoted on an achievement recognition basis. We have recently implemented a career track advancement template, so that all in the company have a general understanding of what it takes to reach the next level. It summarizes the requisite education, credentials, experience, and capabilities which an employee is being evaluated on. Of course, those exhibiting exceptional leadership are looked at frequently and promoted earlier in this track compared to others.
In one word or phrase, what do you describe as your number one job responsibility as CEO?
“Creating opportunity.” I also have a personal mission statement I created recently, which supports this statement.
What happens to the firm if you leave tomorrow?
During our last ownership transition, we strategically took the roles and responsibilities of the past president and assigned it to multiple leaders, based on their demonstrated strengths. Therefore, we inherently have resiliency in the leadership of the company, with the other senior most partner responsible for operations (COO), and a capable group of vice presidents and officers taking responsibility for other business operations. In my absence, I have no doubt our junior leaders and officers could quickly step in to serve in my capacity, taking responsible charge of the financial and strategic planning aspects of our business. As engineers, belts and suspenders are highly regarded in our business operations.
With technology reducing the time it takes to complete design work, how do you get the AEC industry to start pricing on value instead of hours?
Pricing services we provide have always been, and will continue to be, a limiting factor in the development of our services and business planning. Technology gains in efficiency and overall progress are what we strive for every day, but covering those increased costs for development and implementation of those technologies is often not considered. One area in which we are finding success is presenting the options to our clients in terms of value-added proposals, whereby we educate the client on the available technologies and costs to achieve the desired outcome. More often than not, with societal demands for timely results, it can be shown that technological solutions at a higher cost is warranted. Let’s hope this trend continues and is maintained.
If the worker shortage continues, do you see wages increasing to encourage more talent to enter the AEC space, or will technology be used to counter the reduced workforce?
The number of capable resources required to deliver the wide range of services we provide has become the limiting resource to our growth and expansion. As we combat this constraint, we take a multi-faceted approach, including competitive salaries, enhanced benefits, and employee perks, designed to promote a desirable workplace for all levels. More important is the combined investment in technology to improve our delivery efficiency, as it also promotes a competitive and vibrant workplace environment. It is recognized that salaries are increasing to continue to attract and reward those in the industry, but the technology is also a factor in our delivery process.
Engineers love being engineers, but what are you doing to instill a business culture in your firm?
This question is at the heart of SCE. We have always preached the fact that we are a for-profit business, and it so happens our business is primarily centered on engineering. At every level within the company, we train and empower employees to make decisions with the business success in mind. Our business management software is at the core of all aspects of the operation, including business development, finance, operations, and project management. Employees can understand the impact of their decisions based on the information and reporting available from our business management systems. The business culture is alive and well and makes setting and reaching goals that much more meaningful.
Diversity and inclusion is lacking. What steps are you taking to address the issue?
The AEC industry is notorious for a shortage of diversity and inclusion. Remarkably, we have a large number of women in leadership positions, and we expect that trend to continue based on the demographics of our current employee roster. As a firm based in a less diverse hiring area, we are continually pursuing the recruiting of a diverse employee base, simply because of the benefits the variety of experiences and cultures present in delivering results to our clients. While diversity and inclusion have become a priority in many of our clients’ procurement processes, we have explored the possibility of restructuring the company as a woman-owned disadvantaged business. To-date, this major corporate restructuring has not been determined to provide a great benefit, but it remains a topic of discussion as we consider future transition planning.
A firm’s longevity is valuable. What are you doing to encourage your staff to stick around?
Longevity of the firm is an absolute necessity. We are continually intrigued by the success of firms that have existed for decades, recognizing that clients place an exceptional value on the reputation and less importance on the skill set or delivery capability of the current staff. I myself have worked for three firms in my career. From my experience, the most valued staff stick around simply because of the environment for opportunity and professional advancement offered. Employees that recognize this will stay the course and build SCE’s reputation in exceeding client expectations, rather than jump to other firms to advance. Don’t get me wrong, we lose our share of capable employee resources for a variety of reasons, but in every case, the choice to depart is in line with that employees’ ambitions. It is not reasonable to expect that we can create opportunities aligned with everyone’s ambitions and expectations, but what we do strive for is that employees leave better prepared and more experienced than when they arrived.
Benefits are evolving. Are you offering any new ones due to the changing demographic?
Benefit and compensation packages are evolving every year. Most notably, we have recently created an employee perks program, where employees are granted a number of points based on their level of employment status and number of years of experience. They can choose to use those points for a wide variety of perks, including team building activities like bowling and golf leagues, health options and gym memberships, family related activities, or entertainment/leisure activities. Also, SCE has created a company bonus program whereby if the company is successful in reaching its annual performance goals, the week between Christmas and New Year’s is granted as an additional week of vacation and our offices close for that time period. This has been a very popular motivator which also encourages personal and family time.
What scares you about the geopolitical environment today?
Today’s geopolitical environment poses significant challenges to the consistent growth and service categories we expect to achieve. While our services are less influenced by the international business climate, many of our clients’ needs are directly influenced by the world economy. Most prevalent today would be the threatening impacts of foreign trade tariffs. Materials and equipment availability and costs could have an adverse effect on projects we design and a client’s ability to fund infrastructure improvements. Stability in the government and international relations appeared to be at an all-time low under the current administration, and until that changes, we may be in for a bumpy ride.
Have the tax cuts impacted your firm’s valuation? Do you plan on doing another valuation due to the tax cuts?
Our firm valuation is relatively simple. In our shareholder agreement, we have agreed to adopt the Zweig Z-3 formula for all internal share transfers, and it is updated annually, based on updated Zweig variables. We have successfully relied upon that valuation for nearly a decade and conducted several ownership transfer transactions on that basis, without challenge or difficulty. Amazingly, our firm’s value has significantly gone up in recent years due to our growth and profitability, and our commitment to investing back into the company (retained earnings).
SCE at a Glance
Year founded: 1986
Headquarters: Flanders, NJ
Office locations: 3, Flanders, central New Jersey, and Georgia
No. of employees: 105
Services: Engineering, geospatial, land surveying, landscape architecture, utility infrastructure, site development, municipal, regulatory compliance, construction observation, funding and grant programs, and forensic analysis
Mission: Excellence. Economy. Environment.
Life at SCE: The company searches for elite candidates who think, who push their boundaries beyond mediocrity, who are modest enough to let their work speak for them, who take ownership of their performance and display passion and motivation to excel and grow.
Andrew Holt’s Personal Mission Statement:
“As a leader, I Andrew Holt, behave ethically, honorably and honestly in my personal and professional lives. I continually improve through education and experience and apply that enhanced knowledge in my mission to help to improve the lives of those around me. I will succeed by using my critical thinking and communication skills, along with my sense of humor in a continuous process that will surround me with people who are more capable than I will ever be.”
SCE Company Mission Statement:
Creating SOLUTIONS for client SUCCESS by delivering INNOVATIVE and practical professional services.
SCE Core Values:
Anticipate our Clients’ needs and deliver results that EXCEED EXPECTATIONS.
Provide superior CLIENT SERVICE and thoughtful COMMUNICATION.
Exercise the highest PROFESSIONAL and ETHICAL RESPONSIBILITY
supporting our positive reputation in the industry.
Advance the PROFESSIONAL DEVELOPMENT of our employees to
enable them to achieve greater capabilities and rewards.
Deliver exceptional CLIENT CARE through exceptional EMPLOYEE CARE.
Liisa Andreassen is a freelance writer who lives in Asheville, NC. She writes on a variety of topics including architecture and engineering, business management, HR, and technology. She can be reached at email@example.com.